Constantino Vs Cuisia - 106064 - October 13, 2005 - J. Tinga - en Banc - Decision

1/22/2020 Constantino vs Cuisia : 106064 : October 13, 2005 : J.
Tinga : En Banc : Decision
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Cuisia : 106064 : October 13, 2005 : J. Tinga : En Banc : Decision
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EN BANC
Spouses Renato G.R. No. 106064
Constantino, Jr. and
Lourdes Constantino Present:
and their minor children
Renato Redentor, DAVIDE, JR., CJ.,
www.chanrobles.com/scdecisions/jurisprudence2005/oct2005/106064.php 1/28
1/22/2020 Constantino vs Cuisia : 106064 : October 13, 2005 : J. Tinga : En Banc : Decision
Anna Marika Lissa, PUNO,
Nina Elissa, and PANGANIBAN,
Anna Karmina, QUISUMBING,
Freedom From Debt ' YNARES-SANTIAGO,
Coalition, and Filomeno SANDOVAL-GUTIERREZ,
Sta. Ana III, CARPIO,
Petitioners , AUSTRIA-MARTINEZ,
CORONA,
CARPIO-MORALES,
CALLEJO, SR.,
- versus - AZCUNA,
TINGA,
CHICO-NAZARIO, and
GARCIA, JJ.
Hon. Jose B. Cuisia,
in his capacity as Governor
of the Central Bank,
Hon. Ramon delRosario,
in his capacity as Secretary
of Finance, Hon. Emmanuel V.
Pelaez, in his capacity as
Philippine Debt Negotiating
Chairman, and the NATIONAL Promulgated:
TREASURER,
Respondents. October 13, 2005
x-------------------------------------------------------------------x
DECISION
TINGA, J.:
The quagmire that is the foreign debt problem has especially confounded developing nations around the world for
decades. It has defied easy solutions acceptable both to debtor countries and their creditors. It has also emerged
as cause celebre 'for various political movements and grassroots activists and the wellspring of much scholarly
thought and debate.
The present petition illustrates some of the ideological and functional differences between experts on how to
achieve debt relief. However, this being a court of law, not an academic forum or a convention on development
economics, our resolution has to hinge on the presented legal issues which center on the appreciation of the
constitutional provision that empowers the President to contract and guarantee foreign loans. The ultimate choice
is between a restrictive reading of the constitutional provision and an alimentative application thereof consistent
with time-honored principles on executive power and the alter ego doctrine.
This Petition for Certiorari, Prohibition and Mandamus assails said contracts which were entered into pursuant to
the Philippine Comprehensive Financing Program for 1992 (Financing Program or Program'). It seeks to enjoin
respondents from executing additional debt-relief contracts pursuant thereto. It also urges the Court to issue an
order compelling the Secretary of Justice to institute criminal and administrative cases against respondents for
acts which circumvent or negate the provisions Art. XII of the Constitution. [1]
Parties and Facts
The petition was filed on 17 July 1992 by petitioners spouses Renato Constantino, Jr. and Lourdes Constantino
and their minor children, Renato Redentor, Anna Marika Lissa, Nina Elissa, and Anna Karmina, Filomeno Sta. Ana
III, and the Freedom from Debt Coalition, a non-stock, non-profit, non-government organization that advocates
a 'pro-people and just Philippine debt policy. [2] Named respondents were the then Governor of the Bangko
Sentral ng Pilipinas, the Secretary of Finance, the National Treasurer, and the Philippine Debt Negotiation
Chairman Emmanuel V. Pelaez. [3] All respondents were members of the Philippine panel tasked to negotiate
with the country's foreign creditors pursuant to the Financing Program.
The operative facts are sparse and there is little need to elaborate on them.
The Financing Program was the culmination of efforts that began during the term of former President Corazon
Aquino to manage the country's external debt problem through a negotiation-oriented debt strategy involving
cooperation and negotiation with foreign creditors. [4] Pursuant to this strategy, the Aquino government entered
into three restructuring agreements with representatives of foreign creditor governments during the period of
1986 to 1991. [5] During the same period, three similarly-oriented restructuring agreements were executed with
commercial bank creditors. [6]
On 28 February 1992, the Philippine Debt Negotiating Team, chaired by respondent Pelaez, negotiated an
agreement with the country's Bank Advisory Committee, representing all foreign commercial bank creditors, on
the Financing Program which respondents' characterized as' 'a multi-option financing
package. [7] The Program was scheduled to be executed on 24 July 1992 by respondents in
behalf of the Republic. Nonetheless, petitioners alleged that even prior to the execution of
the Program respondents had already implemented its 'buyback component when on 15 May
1992, the Philippines bought back P1.26 billion of external debts pursuant to the Program.
[8]
The petition sought to enjoin the ratification of the Program, but the Court did not issue any
injunctive relief. Hence, it came to pass that the Program was signed in London as
scheduled. The petition still has' to be resolved though as petitioners seek the annulment 'of
any and all acts done by respondents, their subordinates and any other public officer
pursuant to the agreement and program in question. [9] Even after the signing of the
Program, respondents themselves acknowledged that the remaining principal objective of
the petition is to set aside respondents' actions. [10]
Petitioners characterize the Financing Program as a package offered to the country's foreign
creditors consisting of two debt-relief options. [11] The first option was a cash buyback of
portions of the Philippine foreign debt at a discount. [12] The second option allowed creditors
to convert existing Philippine debt instruments into any of three kinds of bonds/securities:
(1) new money bonds with a five-year grace period and 17 years final maturity, the
purchase of which would allow the creditors to convert their eligible debt papers into bearer
bonds with the same terms; (2) interest-reduction bonds with a maturity of 25 years; and
(3) principal-collateralized interest-reduction bonds with a maturity of 25 years. [13]
On the other hand, according to respondents the Financing Program would cover about U.S.
$5.3 billion of foreign commercial debts and it was expected to deal comprehensively with
the commercial bank debt problem of the country and pave the way for the country's access
to capital markets. [14] They add that the Program carried three basic options from which
foreign bank lenders could choose, namely: to lend money, to exchange existing
restructured Philippine debts with an interest reduction bond; or to exchange the same
Philippine debts with a principal collateralized interest reduction bond. [15]
Issues for Resolution
Petitioners raise several issues before this Court.
First, they object to the debt-relief contracts entered into pursuant to the Financing Program
as beyond the powers granted to the President under Section 20,
Article VII of the Constitution. [16] The provision states that the President may contract or
guarantee foreign loans in behalf of the Republic. It is claimed that the buyback and
securitization/bond conversion schemes are neither 'loans' nor 'guarantees, and hence
beyond the power of the President to execute.
Second, according to petitioners even assuming that the contracts under the Financing
Program are constitutionally permissible, yet it is only the President who may exercise the
power to enter into these contracts and such power may not be delegated to respondents.
Third, petitioners argue that the Financing Program violates several constitutional policies
and that contracts executed or to be executed pursuant thereto were or will be done by
respondents with grave abuse of discretion amounting to lack or excess of jurisdiction.
Petitioners contend that the Financing Program was made available for debts that were
either fraudulently contracted or void. In this regard, petitioners rely on a 1992 Commission
on Audit (COA) report which identified several 'behest loans as either contracted or
guaranteed fraudulently during the Marcos regime. [17] They 'posit that since these and
other similar debts, such as the ones pertaining to the Bataan Nuclear Power Plant, [18]
were eligible for buyback or conversion under the Program, the resultant relief agreements
pertaining thereto would be void for being waivers of the Republic's right to repudiate the
void or fraudulently contracted loans.
For their part, respondents dispute the points raised by petitioners. They also question the
standing of petitioners to institute the present petition and the justiciability of the issues
presented.
The Court shall tackle the procedural questions ahead of the substantive issues.
The Court's Rulings
Standing of Petitioners
The individual petitioners are suing as citizens of the Philippines; those among them who are
of age are suing in their additional capacity as taxpayers. [19] It is not indicated in what
capacity the Freedom from Debt Coalition is suing.
Respondents point out that petitioners have no standing to file the present suit since the rule
allowing taxpayers to assail executive or legislative acts has been applied only to cases
where the constitutionality of a statute is involved. At the same time, however, they urge
this Court to exercise its wide discretion and waive petitioners' lack of standing. They invoke
the transcendental importance of resolving the validity of the questioned debt-relief
contracts and others of similar import.
The recent trend on locus standi has veered towards a liberal treatment in taxpayer's suits.
In Tatad v. Garcia Jr., [20] this Court reiterated that the 'prevailing doctrines in taxpayer's
suits are to allow taxpayers to question contracts entered into by the national government or
government owned and controlled corporations allegedly in contravention of law. [21] A
taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or
that public money is being deflected to any improper purpose, or that there is a wastage of
public funds through the enforcement of an invalid or unconstitutional law. [22]
Moreover, a ruling on the issues of this case will not only determine the validity or invalidity
of the subject pre-termination and bond-conversion of foreign debts but also create a
precedent for other debts or debt-related contracts executed or to be executed in behalf of
the President of the Philippines by the Secretary of Finance. Considering the reported
Philippine debt of P3.80 trillion as of November 2004, the foreign public borrowing
component of which reached P1.81 trillion in November, equivalent to 47.6% of total
government borrowings, [23] the importance of the issues raised and the magnitude of the
public interest involved are indubitable.
Thus, the Court's cognizance of this petition is also based on the consideration that the
determination of the issues presented will have a bearing on the state of the country's
economy, its international financial ratings, and perhaps even the Filipinos' way of life. Seen
in this light, the transcendental importance of the issues herein presented cannot be
doubted.
Where constitutional issues are properly raised in the context of alleged facts, procedural
questions acquire a relatively minor significance. [24] We thus hold that by the very nature
of the power wielded by the President, the effect of using this power on the economy, and
the well-being in general of the Filipino nation, the Court must set aside the procedural
barrier of standing and rule on the justiciable issues presented by the parties.
Ripeness/Actual Case Dimension
Even as respondents concede the transcendental importance of the issues at bar, in their
Rejoinder they ask this Court to dismiss the Petition. Allegedly, petitioners' arguments are
mere attempts at abstraction. [25] Respondents are correct to some degree. Several issues,
as shall be discussed in due course, are not ripe for adjudication.
The allegation that respondents waived the Philippines' right to repudiate void and
fraudulently contracted loans by executing the debt-relief agreements is, on many levels,
not justiciable.
In the first place, records do not show whether the so-called behest loansor other allegedly
void or fraudulently contracted loans for that matterwere subject of the debt-relief contracts
entered into under the Financing Program.
Moreover, asserting a right to repudiate void or fraudulently contracted loans begs the
question of whether indeed particular loans are void or fraudulently contracted. Fraudulently
contracted loans are voidable and, as such, valid and enforceable until annulled by the
courts. On the other hand, void contracts that have already been fulfilled must be declared
void in view of the maxim that no one is allowed to take the law in his own hands. [26]
Petitioners' theory depends on a prior annulment or declaration of nullity of the pre-existing
loans, which thus far have not been submitted to this Court. Additionally, void contracts are
unratifiable by their very nature; they are null and void ab initio. Consequently, from the
viewpoint of civil law, what petitioners present as the Republic's 'right to repudiate is yet a
contingent right, one which cannot be allowed as an anticipatory basis for annulling the
debt-relief contracts. Petitioners' contention that the debt-relief agreements are tantamount
to waivers of the Republic's 'right to repudiate so-called behest loans is without legal
foundation.
It may not be amiss to recognize that there are many advocates of the position that the
Republic should renege on obligations that are considered as 'illegitimate. However, should
the executive branch unilaterally, and possibly even without prior court determination of the
validity or invalidity of these contracts, repudiate or otherwise declare to the international
community its resolve not to recognize a certain set of 'illegitimate loans, adverse
repercussions [27] would come into play. Dr. Felipe Medalla, former Director General of the
National Economic Development Authority, has warned, thus:
One way to reduce debt service is to repudiate debts, totally or selectively.

Taken to its limit, however, such a strategy would put the Philippines at such
odds with too many enemies. Foreign commercial banks by themselves and
without the cooperation of creditor governments, especially the United States,
may not be in a position to inflict much damage, but concerted sanctions from
commercial banks, multilateral financial institutions and creditor governments
would affect not only our sources of credit but also our access to markets for
our exports and the level of development assistance. . . . [T]he country might
face concerted sanctions even if debts were repudiated only selectively.
The point that must be stressed is that repudiation is not an attractive

alternative if net payments to creditors in the short and medium-run can be
reduced through an agreement (as opposed to a unilaterally set ceiling on debt
service payments) which provides for both rescheduling of principal and
capitalization of interest, or its equivalent in new loans, which would make it
easier for the country to pay interest. [28]
Sovereign default is not new to the Philippine setting. In October 1983, the Philippines
declared a moratorium on principal payments' on its external debts that eventually
lasted four years, [29] that virtually closed the country's access to new foreign money [30]
and drove investors to leave the Philippine market, resulting in some devastating
consequences. [31] It would appear then that this beguilingly attractive and dangerously
simplistic solution deserves the utmost circumspect cogitation before it is resorted to.
In any event, the discretion on the matter lies not with the courts but with the executive.
Thus, the Program was conceptualized as' an offshoot of the decision made by then
President Aquino that the Philippines should recognize its sovereign debts [32] despite the
controversy that engulfed many debts incurred during the Marcos era.It is a scheme
whereby the Philippines restructured its debts following a negotiated approach instead of a
default approach to manage the bleak Philippine debt situation.
As a final point, petitioners have no real basis to fret over a possible waiver of the right to
repudiate void contracts. Even assuming that spurious loans had become the subject of
debt-relief contracts, respondents unequivocally assert that the Republic did not waive any
right to repudiate void or fraudulently contracted loans, it having incorporated a 'no-waiver
clause in the agreements. [33]
Substantive Issues
It is helpful to put the matter in perspective before moving on to the merits. The Financing
Program extinguished portions of the country's pre-existing loans
through either debt buyback or bond-conversion. The buyback approach essentially pre-
terminated portions of public debts while the bond-conversion scheme extinguished public
debts through the obtention of a new loan by virtue of a sovereign bond issuance, the
proceeds of which in turn were used for terminating the original loan.
First Issue: The Scope of Section 20, Article VII
For their first constitutional argument, petitioners submit that the buyback and bond-
conversion schemes do not constitute the loan 'contract or 'guarantee contemplated in the
Constitution and are consequently prohibited. Sec. 20, Art. VII of the Constitution provides,
viz:
The President may contract or guarantee foreign loans in behalf of the Republic
of the Philippines with the prior concurrence of the Monetary Board and subject
to such limitations as may be provided under law. The Monetary Board shall,
within thirty days from the end of every quarter of the calendar year, submit to
the Congress a complete report of its decisions on applications for loans to be
contracted or guaranteed by the government or government-owned and
controlled corporations which would have the effect of increasing the foreign
debt, and containing other matters as may be provided by law.
On Bond-conversion
Loans are transactions wherein the owner of a property allows another party to use the
property and where customarily, the latter promises to return the property after a specified
period with payment for its use, called interest. [34] On the other hand, bonds are interest-
bearing or discounted government or corporate securities that obligate the issuer to pay the
bondholder a specified sum of money, usually at specific intervals, and to repay the principal
amount of the loan at maturity. [35] The word 'bond means contract, agreement, or
guarantee. All of these terms are applicable to the securities known as bonds. An investor
who purchases a bond is lending money to the issuer, and the bond represents the issuer's
contractual promise to pay interest and repay principal according to specific terms. A short-
term bond is often called a note. [36]
The language of the Constitution is simple and clear as it is broad. It allows the President to
contract and guarantee foreign loans. It makes no prohibition on the issuance of certain
kinds of loans or distinctions as to which kinds of debt instruments are more onerous than
others. This Court may not ascribe to the Constitution meanings and restrictions that would
unduly burden the powers of the President. The plain, clear and unambiguous language of
the Constitution should be construed in a sense that will allow the full exercise of the power
provided therein. It would be the worst kind of judicial legislation if the courts were to
misconstrue and change the meaning of the organic act.
The only restriction that the Constitution provides, aside from the prior concurrence of the
Monetary Board, is that the loans must be subject to limitations provided by law. In this
regard, we note that Republic Act (R.A.) No. 245 as amended by Pres. Decree (P.D.) No.
142, s. 1973, entitled An Act Authorizing the Secretary of Finance to Borrow to Meet Public
Expenditures Authorized by Law, and for Other Purposes, allows foreign loans to be
contracted in the form of, inter alia, bonds. Thus:
Sec. 1. In order to meet public expenditures authorized by law or to provide for

the purchase, redemption, or refunding of any obligations, either direct or
guaranteed of the Philippine Government, the Secretary of Finance, with
the approval of the President of the Philippines, after consultation with
the Monetary Board, is authorized to borrow from time to time on the
credit of the Republic of the Philippines such sum or sums as in his
judgment may be necessary, and to issue therefor evidences of
indebtedness of the Philippine Government."
Such evidences of indebtedness may be of the following types:
....
c. Treasury bonds, notes, securities or other evidences of indebtedness

having maturities of one year or more but not exceeding twenty-five
years from the date of issue. (Emphasis supplied.)
Under the foregoing provisions, sovereign bonds may be issued not only to supplement
government expenditures but also to provide for the purchase, [37] redemption, [38] or
refunding [39] of any obligation, either direct or guaranteed, of the Philippine Government.
Petitioners, however, point out that a supposed difference between contracting a loan and
issuing bonds is that the former creates a definite creditor-debtor relationship between the
parties while the latter does not. [40] They explain that a contract of loan enables the debtor
to restructure or novate the loan, which benefit is lost upon the conversion of the debts to
bearer bonds such that 'the Philippines surrenders the novatable character of a loan contract
for the irrevocable and unpostponable demandability of a bearer bond. [41] Allegedly, the
Constitution prohibits the President from issuing bonds which are 'far more onerous' than
loans. [42]
This line of thinking is flawed to say the least. The negotiable character of the subject bonds
is not mutually exclusive with the Republic's freedom to negotiate with bondholders for the
revision of the terms of the debt. Moreover, the securities market provides some flexibilityif
the Philippines wants to pay in advance, it can buy out its bonds in the market; if interest
rates go down but the Philippines does not have money to retire the bonds, it can replace
the old bonds with new ones; if it defaults on the bonds, the bondholders shall organize and
bring about a re-negotiation or settlement. [43] In fact, several countries' have restructured
their sovereign bonds in view either of
inability and/or unwillingness to pay the indebtedness. [44] Petitioners have not presented a
plausible reason that would preclude the Philippines from acting in a similar fashion, should
it so opt.
This theory may even be dismissed in a perfunctory manner since petitioners are merely
expecting that the Philippines would opt to restructure the bonds but with the negotiable
character of the bonds, would be prevented from so doing. This is a contingency which
petitioners do not assert as having come to pass or even imminent. Consummated acts of
the executive cannot be struck down by this Court merely on the basis of petitioners'
anticipatory cavils.
On the Buyback Scheme
In their Comment, petitioners assert that the power to pay public debts' lies' with Congress'
and was deliberately
withheld by the Constitution from the President. [45] It is true that in the balance of power
between the three branches of government, it is Congress that manages the country's
coffers by virtue of its taxing and spending powers. However, the law-making authority has
promulgated a law ordaining an automatic appropriations provision for debt servicing [46] by
virtue of which the President is empowered to execute debt payments without the need for
further appropriations. Regarding these legislative enactments, this Court has held, viz:
Congress deliberates or acts on the budget proposals of the President, and

Congress in the exercise of its own judgment and wisdom formulates an
appropriation act precisely following the process established by the
Constitution, which specifies that no money may be paid from the Treasury
except in accordance with an appropriation made by law.
Debt service is not included in the General Appropriation Act, since

authorization therefor already exists under RA Nos. 4860 and 245, as amended,
and PD 1967. Precisely in the light of this subsisting authorization as embodied
in said Republic Acts and PD for debt service, Congress does not concern itself
with details for implementation by the Executive, but largely with annual levels
and approval thereof upon due deliberations as part of the whole obligation
program for the year. Upon such approval, Congress has spoken and cannot be
said to have delegated its wisdom to the Executive, on whose part lies the
implementation or execution of the legislative wisdom. [47]
Specific legal authority for the buyback of loans is established under Section 2 of Republic
Act (R.A.) No. 240, viz:
Sec. 2. The Secretary of Finance shall cause to be paid out of any

moneys in the National Treasury not otherwise appropriated, or
from any sinking funds provided for the purpose by law, any
interest falling due, or accruing, on any portion of the public debt
authorized by law. He shall also cause to be paid out of any such
money, or from any such sinking funds the principal amount of
any obligations which have matured, or which have been called for
redemption or for which redemption has been demanded in accordance
with terms prescribed by him prior to date of issue: Provided, however,
That he may, if he so chooses and if the holder is willing, exchange any
such obligation with any other direct or guaranteed obligation or
obligations of the Philippine Government of equivalent value. In the case
of interest-bearing obligations, he shall pay not less than their face
value; in the case of obligations issued at a discount he shall pay the
face value at maturity; or, if redeemed prior to maturity, such
portion of the face value as is prescribed by the terms and
conditions under which such obligations were originally issued.
(Emphasis supplied.)
The afore-quoted provisions of law specifically allow the President to pre-terminate debts
without further action from Congress.
Petitioners claim that the buyback scheme is neither a guarantee nor a loan since its
underlying intent is to extinguish debts that are not yet due and demandable. [48] Thus,
they suggest that contracts entered pursuant to the buyback scheme are unconstitutional for
not being among those contemplated in Sec. 20, Art. VII of the Constitution.
Buyback is a necessary power which springs from the grant of the foreign borrowing power.
Every statute is understood, by implication, to contain all such provisions as may be
necessary to effectuate its object and purpose, or to make effective rights, powers,
privileges or jurisdiction which it grants, including all such collateral and subsidiary
consequences as may be fairly and logically inferred from its terms. [49] The President is not
empowered to borrow money from foreign banks and governments on the credit of the
Republic only to be left bereft of authority to implement the payment despite appropriations
therefor.
Even petitioners concede that '[t]he Constitution, as a rule, does not enumeratelet alone
enumerate allthe acts which the President (or any other public officer) may not
do, [50] and '[t]he fact that the Constitution does not explicitly bar the President from
exercising a power does not mean that he or she does not have that power. [51] It is
inescapable from the standpoint of reason and necessity that the authority to contract
foreign loans and guarantees without restrictions on payment or manner thereof coupled
with the availability of the corresponding appropriations, must include the power to effect
payments or to make payments unavailing by either restructuring the loans or even refusing
to make any payment altogether.
More fundamentally, when taken in the context of sovereign debts, a buyback is simply the
purchase by the sovereign issuer of its own debts at a discount. Clearly then, the objection
to the validity of the buyback scheme is without basis.
Second Issue: Delegation of Power
Petitioners stress that unlike other powers which may be validly delegated by the President,
the power to incur foreign debts is expressly reserved by the Constitution in the person of
the President. They argue that the gravity by which the exercise of the power will affect the
Filipino nation requires that the President alone must exercise this power. They submit that
the requirement of prior concurrence of an entity specifically named by the Constitutionthe
Monetary Boardreinforces the submission that not respondents but the President 'alone and
personally can validly bind the country.
Petitioners' position is negated both by explicit constitutional [52] and legal [53]
imprimaturs, as well as the doctrine of qualified political agency.
The evident exigency of having the Secretary of Finance implement the decision of the
President to execute the debt-relief contracts is made manifest by the fact that the process
of establishing and executing a strategy for managing the government's debt is deep within
the realm of the expertise of the Department of Finance, primed as it is to raise the required
amount of funding, achieve its risk and cost objectives, and meet any other sovereign debt
management goals. [54]
If, as petitioners would have it, the President were to personally exercise every aspect of the
foreign borrowing power, he/she would have to pause from running the country long enough
to focus on a welter of time-consuming detailed activitiesthe propriety of
incurring/guaranteeing loans, studying and choosing among the many methods that may be
taken toward this end, meeting countless times with creditor representatives to negotiate,
obtaining the concurrence of the Monetary Board, explaining and defending the negotiated
deal to the public, and more often than not, flying to the agreed place of execution to sign
the documents. This sort of constitutional interpretation would negate the very existence of
cabinet positions and the respective expertise which the holders thereof are accorded and
would unduly hamper the President's effectivity in running the government.
Necessity thus gave birth to the doctrine of qualified political agency, later adopted in Villena
v. Secretary of the Interior [55] from American jurisprudence, viz:
With reference to the Executive Department of the government, there is one

purpose which is crystal-clear and is readily visible without the projection of
judicial searchlight, and that is the establishment of a single, not plural,
Executive. The first section of Article VII of the Constitution, dealing with the
Executive Department, begins with the enunciation of the principle that "The
executive power shall be vested in a President of the Philippines." This means
that the President of the Philippines is the Executive of the Government of the
Philippines, and no other. The heads of the executive departments occupy
political positions and hold office in an advisory capacity, and, in the language
of Thomas Jefferson, "should be of the President's bosom confidence" (7
Writings, Ford ed., 498), and, in the language of Attorney-General Cushing (7
Op., Attorney-General, 453), "are subject to the direction of the President."
Without minimizing the importance of the heads of the various departments,
their personality is in reality but the projection of that of the President. Stated
otherwise, and as forcibly characterized by Chief Justice Taft of the Supreme
Court of the United States, "each head of a department is, and must be, the
President's alter ego in the matters of that department where the President is
required by law to exercise authority" (Myers vs. United States, 47 Sup. Ct.
Rep., 21 at 30; 272 U. S., 52 at 133; 71 Law. ed., 160). [56]
As it was, the backdrop consisted of a major policy determination made by then President
Aquino that sovereign debts have to be respected and the concomitant reality that the
Philippines did not have enough funds to pay the debts. Inevitably, it fell upon the Secretary
of Finance, as the alter ego of the President regarding 'the sound and efficient management
of the financial resources of the Government, [57] to formulate a scheme for the
implementation of the policy publicly expressed by the President herself.
Nevertheless, there are powers vested in the President by the Constitution which may not be
delegated to or exercised by an agent or alter ego of the President. Justice Laurel, in his
ponencia in Villena, makes this clear:
Withal, at first blush, the argument of ratification may seem plausible under the
circumstances, it should be observed that there are certain acts which, by their
very nature, cannot be validated by subsequent approval or ratification by the

President. There are certain constitutional powers and prerogatives of the Chief
Executive of the Nation which must be exercised by him in person and no
amount of approval or ratification will validate the exercise of any of those
powers by any other person. Such, for instance, in his power to suspend the
writ of habeas corpus and proclaim martial law (PAR. 3, SEC. 11, Art. VII) and
the exercise by him of the benign prerogative of mercy (par. 6, sec. 11, idem).
[58]
These distinctions hold true to this day. There are certain presidential powers which arise out
of exceptional circumstances, and if exercised, would involve the suspension of fundamental
freedoms, or at least call for the supersedence of executive prerogatives over those
exercised by co-equal branches of government. The declaration of martial law, the
suspension of the writ of habeas corpus, and the exercise of the pardoning power
notwithstanding the judicial determination of guilt of the accused, all fall within this special
class that demands the exclusive exercise by the President of the constitutionally vested
power. The list is by no means exclusive, but there must be a showing that the executive
power in question is of similar gravitas and exceptional import.
We cannot conclude that the power of the President to contract or guarantee foreign debts
falls within the same exceptional class. Indubitably, the decision to contract or guarantee
foreign debts' is of vital public interest, but only
akin to any contractual obligation undertaken by the sovereign, which arises not from any
extraordinary incident, but from the established functions of governance.
Another important qualification must be made. The Secretary of Finance or any designated
alter ego of the President is bound to secure the latter's prior consent to or subsequent
ratification of his acts. In the matter of contracting or guaranteeing foreign loans, the
repudiation by the President of the very acts performed in this regard by the alter ego will
definitely have binding effect. Had petitioners herein succeeded in demonstrating that the
President actually withheld approval and/or repudiated the Financing Program, there could
be a cause of action to nullify the acts of respondents. Notably though, petitioners do not
assert that respondents pursued the Program without prior authorization of the President or
that the terms of the contract were agreed upon without the President's authorization.
Congruent with the avowed preference of then President Aquino to honor and restructure
existing foreign debts, the lack of showing that she countermanded the acts of respondents
leads us to conclude that said acts carried presidential approval.
With constitutional parameters already established, we may also note, as a source of

suppletory guidance, the provisions of R.A. No. 245. The afore-quoted Section 1 thereof
empowers the Secretary of Finance with the approval of the President and after consultation
[59] of the Monetary Board, 'to borrow from time to time on the credit of the Republic of the
Philippines such sum or sums as in his judgment may be necessary, and to issue therefor
evidences of indebtedness of the Philippine Government. Ineluctably then, while the
President wields the borrowing power it is the Secretary of Finance who normally carries out
its thrusts.
In our recent rulings in Southern Cross Cement Corporation v. The Philippine Cement
Manufacturers Corp., [60] this Court had occasion to examine the authority granted by
Congress to the Department of Trade and Industry (DTI) Secretary to impose safeguard
measures pursuant to the Safeguard Measures Act. In doing so, the Court was impelled to
construe Section 28(2), Article VI of the Constitution, which allowed Congress, by law, to
authorize the President to fix within specified limits, and subject to such limitations and
restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the framework of the national development
program of the Government. [61]
While the Court refused to uphold the broad construction of the grant of power as preferred
by the DTI Secretary, it nonetheless tacitly acknowledged that Congress could designate the
DTI Secretary, in his capacity as alter ego of the President, to exercise the authority vested
on the chief executive under Section 28(2), Article VI. [62] At the same time, the Court
emphasized that since Section 28(2), Article VI authorized Congress to impose limitations
and restrictions on the authority of the President to impose tariffs and imposts, the DTI
Secretary was necessarily subjected to the same restrictions that Congress could impose on
the President in the exercise of this taxing power.
Similarly, in the instant case, the Constitution allocates to the President the exercise of the
foreign borrowing power 'subject to such limitations as may be provided under law.
Following Southern Cross, but in line with the limitations as defined in Villena, the
presidential prerogative may be exercised by the President's alter ego, who in this case is
the Secretary of Finance.
It bears emphasis that apart from the Constitution, there is also a relevant statute, R.A. No.
245, that establishes the parameters by which the alter ego may act in behalf of the
President with respect to the borrowing power. This law expressly provides that the
Secretary of Finance may enter into foreign borrowing contracts. This law neither amends
nor goes contrary to the Constitution but merely implements the subject provision in a
manner consistent with the structure of the Executive Department and the alter ego doctine.
In this regard, respondents have declared that they have followed the restrictions provided
under R.A. No. 245, [63] which include the requisite presidential authorization and which, in
the absence of proof and even allegation to the contrary, should be regarded in a fashion
congruent with the presumption of regularity bestowed on acts done by public officials. '
Moreover, in praying that the acts of the respondents, especially that of the Secretary of
Finance, be nullified as being in violation of a restrictive constitutional interpretation,
petitioners in effect would have this Court declare R.A. No. 245 unconstitutional. We will not
strike
down a law or provisions thereof without so much as a direct attack thereon when simple
and logical statutory construction would suffice.
' Petitioners also submit that the unrestricted character of the Financing Program violates
the framers' intent behind Section 20, Article VII to restrict the power of the President. This
intent, petitioners note, is embodied in the proviso in Sec. 20, Art. VII, which states that
said power is 'subject to such limitations as may be provided under law. However, as
previously discussed, the debt-relief contracts are governed by the terms of R.A. No. 245, as
amended by P.D. No. 142 s. 1973, and therefore were not developed in an unrestricted
setting.
Third Issue: Grave Abuse of Discretion and
Violation of Constitutional Policies
We treat the remaining issues jointly, for in view of the foregoing determination, the general
allegation of grave abuse of discretion on the part of respondents would arise from the
purported violation of various state policies as expressed in the Constitution.
Petitioners allege that the Financing Program violates the constitutional state policies to
promote a social order that will ensure the prosperity and independence of the nation and
free 'the people from poverty, [64] foster 'social justice in all phases of national
development, [65] and develop a self-reliant and independent national economy effectively
controlled by Filipinos; [66] thus, the contracts executed or to be executed pursuant thereto
were or would be tainted by a grave abuse of discretion amounting to lack or excess of
jurisdiction.
Respondents cite the following in support of the propriety of their acts: [67] (1) a
Department of Finance study showing that as a result of the implementation of voluntary
debt reductions schemes, the country's debt stock was reduced by U.S. $4.4 billion as of
December 1991; [68] (2) revelations made by independent individuals made in a hearing
before the Senate Committee on Economic Affairs indicating that the assailed agreements
would bring about substantial benefits to the country; [69] and (3) the Joint Legislative-
Executive Foreign Debt Council's endorsement of the approval of the financing package
containing the debt-
relief agreements and issuance of a Motion to Urge the Philippine Debt Negotiating Panel to
continue with the negotiation on the aforesaid package. [70]
Even with these justifications, respondents aver that their acts are within the arena of
political questions which, based on the doctrine of separation of powers, [71] the judiciary
must leave without interference lest the courts substitute their judgment for that of the
official concerned and decide a matter which by its nature or law is for the latter alone to
decide. [72]
On the other hand, in furtherance of their argument on respondents' violation of

constitutional policies, petitioners cite an article of Jude Esguerra, The 1992 Buyback and
Securitization Agreement with Philippine Commercial Bank Creditors, [73] in illustrating a
best-case scenario in entering the subject debt-relief agreements. The computation results
in a yield of $218.99 million, rather
than the $2,041.00 million 'claimed by the debt negotiators. [74] On the other hand, the
worst-case scenario allegedly is that a net amount of $1.638 million will flow out of the
country as a result of the debt package. [75]
Assuming the accuracy of the foregoing for the nonce, despite the watered-down parameters
of petitioners' computations, we can make no conclusion other than that respondents' efforts
were geared towards debt-relief with marked positive results and towards achieving the
constitutional policies which petitioners so hastily declare as having been violated by
respondents. We recognize that as with other schemes dependent on volatile market and
economic structures, the contracts entered into by respondents may possibly have a net
outflow and therefore negative result. However, even petitioners call this latter event the
worst-case scenario. Plans are seldom foolproof. To ask the Court to strike down debt-relief
contracts, which, according to independent third party evaluations using historically-
suggested rates would result in 'substantial debt-relief, [76] based merely on the possibility
of petitioners' worst-case scenario projection, hardly seems reasonable.
Moreover, the policies set by the Constitution as litanized by petitioners are not a panacea
that can annul every governmental act sought to be struck down. The gist of petitioners'
arguments on violation of constitutional policies and grave abuse of discretion boils down to
their allegation that the debt-relief agreements entered into by respondents do not deliver
the kind of debt-relief that petitioners would want. Petitioners cite the aforementioned article
in stating that that 'the agreement achieves little that cannot be gained through less
complicated means like postponing (rescheduling) principal payments, [77] thus:
[T]he price of success in putting together this debt-relief package (indicates)

the possibility that a simple rescheduling agreement may well turn out to be
less expensive than this comprehensive debt-relief package. This means that in
the next six years the humble and simple rescheduling process may well be the
lesser evil because there is that distinct possibility that less money will flow out
of the country as a result.
Note must be taken that from these citations, petitioners submit that there is possibly a
better way to go about debt rescheduling and, on that basis, insist that the acts of
respondents must be struck down. These are rather tenuous grounds to condemn the
subject agreements as violative of constitutional principles.
Conclusion
The raison d etre of the Financing Program is to manage debts incurred by the Philippines in
a manner that will lessen the burden on the Filipino taxpayersthus the term 'debt-relief
agreements. The measures objected to by petitioners were not aimed at incurring more
debts but at terminating pre-existing debts and were backed by the know-how of the
country's economic managers as affirmed by third party empirical analysis.
That the means employed to achieve the goal of debt-relief do not sit well with
petitioners is beyond the power of this Court to remedy. The exercise of the power of judicial
review is merely to checknot supplantthe Executive, or to simply ascertain whether he has
gone beyond the constitutional limits of his jurisdiction but not to exercise the power vested
in him or to determine the wisdom of his act. [78] In cases where the main purpose is to
nullify governmental acts whether as unconstitutional or done with grave abuse of
discretion, there is a strong presumption in favor of the validity of the assailed acts. The
heavy onus is in on petitioners to overcome the presumption of regularity.
We find that petitioners have not sufficiently established any basis for the Court to
declare the acts of respondents as unconstitutional.
WHEREFORE the petition is hereby DISMISSED. No costs.
SO ORDERED.
DANTE O. TINGA Associate Justice
WE CONCUR:
HILARIO G. DAVIDE, JR.
Chief Justice
REYNATO S. PUNO ARTEMIO V. PANGANIBAN
Associate Justice Associate Justice
LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO
ANGELINA SANDOVAL-GUTIERREZ ANTONIO T. CARPIO
MA. ALICIA AUSTRIA - MARTINEZ RENATO C. CORONA
CONCHITA CARPIO-MORALES ROMEO J. CALLEJO, SR.
ADOLFO S. AZCUNA ' MINITA V. CHICO-NAZARIO Associate Justice Associate Justice
'CANCIO C. GARCIA
Associate Justice
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the
conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court.
HILARIO G. DAVIDE, JR.
Chief Justice
Endnotes:
[1]Acts which under Sec. 22, Article XII of the Constitution shall be considered inimical to
the national interest and subject to criminal and civil sanctions, as may be provided by
law.
[2]Rollo, pp. 3-4.
[3]Former Vice-President of the Philippines, since deceased.
[4]Rollo, p. 58.
[5]Id. at 59. According to respondents, these agreements involved the rescheduling of

public sector debts to bilateral creditors, thereby lengthening the maturity for its
repayments and whereby portions of interest of maturing debts were capitalized in the
process of rescheduling.
[6]Ibid.
[7]Id. at 60. Per respondents, the deal consisted of three debt-relief agreements, the
'Principle Collateralized Interest Reduction Bond Issuance and Exchange Agreement, the
'Philippine Bond Issuance and Exchange Agreement, and the Interest Reduction Bond
Issuance and Exchange Agreement.
[8]Rollo, p. 7 citing a newspaper article in the Daily Globe dated 15 May 1992. Petitioners
make no indication whether the loans identified in the COA report are among those
included in the questioned debt-relief agreements. Cf: note 17.
[9]Id. at 25.
[10]Id. at 58.
[11]Id. at 5.
[12]Ibid.
[13]Ibid citing a Newsday article dated 27 April 1992, Annex 'A of the Petition.
[14]Rollo, p. 60 citing a speech given by former Central Bank Governor Jose L. Cuisia, Jr.
at the joint meeting of FINEX, Makati Business Club and Management Association of the
Philippines held on 19 November 1991 at the Grand Ballroom of the Hotel Intercontinental
Manila.
[15]Ibid.
[16]The President may contract or guarantee foreign loans in behalf of the Republic of the
Philippines with the prior concurrence of the Monetary Board and subject to such
limitations as may be provided under law. The Monetary Board shall, within thirty days
from the end of every quarter of the calendar year, submit to the Congress a complete
report of its decisions on applications for loans to be contracted or guaranteed by the
government or government-owned and controlled corporations which would have the
effect of increasing the foreign debt, and containing other matters as may be provided by
law.
[17]1. North Davao Mining Corp. ' $117.712
(In millions of U.S. Dollars)
2. Bukidnon Sugar Milling Co., Inc. 68.940
3. United Planters Sugar Milling Co. 62.669
4. Northern Cotabato Sugar Ind. Inc. 45.200
5. Asia Industries Inc. 25.000
6. Domestic Satellite Philippines 18.540
7. PNB Deposit Facility/AMEXCO 17.000
8. Pamplona Redwood Veneer Inc. 15.160
9. Mindanao Coconut Oil Mills ' 6.900
10. Government Service Insurance System 10.650
11. Philippine Phosphate Fertilizer Corp. 565.514
12. Pagdanganan Timbre Products Inc. 13.500
13. Menzi Development Corp. 13.000
14. Sabena Mining Corp. 27.500
[18]Rollo, p. 6.
[19]Id. at 4.
[20]313 Phil. 296 (1995).
[21]Id. at 320, citing Kilosbayan v. Morato, G.R. No. 113375, 5 May 1994, 232 SCRA 110,
139. Del Mar v. PAGCOR, 346 SCRA 485, 501 (2000) citing Kilosbayan, Inc., et al. v.
Morato, 250 SCRA 333 (1976); Dumlao v. Comelec, 95 SCRA 392 (1980); Sanidad v.
Commission on Elections, 73 SCRA 333 (1976); Philconsa v. Mathay, 18 SCRA 300
(1966); Pascual v. Secretary of Public Works, 110 Phil. 331 (1960); Pelaez v. Auditor
General, 15 SCRA 569 (1965); Philconsa v. Gimenez, 15 SCRA 479 (1965); Iloilo Palay &
Corn Planters Association v. Feliciano, 13 SCRA 377 (1965).
[22]Francisco v. House of Representatives, G.R. No. 160405, November 10, 2003, 415
SCRA 44, 136.
[23]< http://www.adb.org/documents/books/ado/2005/phi.asp>; See also newspaper

article by Maricel E. Burgonio, Govt debts reach P4T in January, The Manila Times, April
28, 2005 reporting that the national government incurred a total outstanding debt of P4
trillion as of January 2005, representing an increase of 5.1 percent from the reported
P3.81 trillion as of end-2004, per Department of Finance data and of the government's
total debt, about P1.97 trillion is owed to foreign creditors; P2.04 trillion is owed to
domestic creditors,
http://www.manilatimes.net/national/2005/apr/28/yehey/business/20050428bus2.php>,
reported also in the 'news' item site of the Department of Budget and Management,
<http://www.dbm.gov.ph/current_issues/ pressrelease/2005/04-april/press_042805-
govt%20debts.php>.
[24]Guingona, Jr. v. Gonzales, G.R. No. 106971, 20 October 1992, 214 SCRA 709, 794.
[25]Rollo, p. 105.
[26]See Arturo M. Tolentino, The Civil Code, Vol. IV, c. 1987, p. 632.
[27]Among the consequences discussed hereunder, the standard cross-default provisions

in Philippine foreign loans may come into effect, in which case, default even in one loan
would be a ground for other creditors to declare default on other loans. See Innovative
Solutions to the Philippine Debt Problemby Gov. Gabriel C. Singson, speaking at a debt
forum held 28 March 2005, hosted by the Management Association of the Philippines.
[28]Dr. Felipe Medalla, The Management of External Debt, PIDS Development Research
News, Volume V, No. 2, (1987), p. 2. Dr. Medalla is an Associate Professor at the School of
Economics, University of the Philippines.
[29]External Debt: Developments, Issues, and Options, speech delivered by former

Finance Secretary Vicente R. Jayme during the general membership meeting of the Makati
Business Club on 31 May 1988, at the Hotel Inter-Continental, Manila.
[30]Thus the period that followed was characterized by stringent foreign exchange
rationing. See talk delivered by former Finance Secretary Edgardo B. Espiritu at the
Freedom From Debt Coalition's Fiscal and Debt Discussion at the University of the
Philippines in December 2002.
[31]In less than a year after the country sought debt moratorium, the exchange rate went
as high as 100 percent, bellwether interest rate shot up to 43 percent and inflation soared
to 47.1 percent, after investors raced each other in leaving a deteriorating economy.
Former Central Bank Governor Gabriel Singson in the 'news item site of the Department
of Budget and Management,
http://www.map.com.ph/articles_innovative%20solution%20for%20phil%20problem.php;
Thus far, the Philippines is the only country in Asia that experienced a debt moratorium. I
believe that no single event has brought more damage to the economy ' not even the
1997 Asian financial crisis - than the 1983 debt moratorium. P - $ exchange rate went up
by almost 100% from P 9.17 on January 3, 1983 to P 18.02 to the dollar on June 6, 1984,
a period of less than one year and a half; interest rates. The 91-day T-bill hit 43% in Nov.
1984; GNP in 1984 was negative 9.11l; Inflation ' average inflation for 1984 jumped to
47.1%. At the height of the Asian financial crisis in 1998 the average inflation was 9.7%;
the country had no access to the voluntary capital markets for almost 10 years, 1983 to
1992. Speech of former Central Bank Governor Gabriel C. Singson, supra note 27.
[32]The debt crisis has effectively snagged the debtor countries in a financial vise
Meanwhile, the creditors generally insist on debt service payment, often in amounts that
were greater than national spending on health and education. The crisis must be
addressed at the global level. See Jeffrey Sachs, The End of Poverty, Penguin Group
(USA),Inc., 375 Hudson St., New York, N.Y., 10014, U.S.A. Jeffrey Sachs is the Director of
the Earth Institute, Quetelet Professor of Sustainable Development, and Professor of
Health Policy and Management at Columbia University as well as Special Advisor to United
Nations Secretary General Kofi Annan.
[33]Annex 'D of Comment, id. at 130.
[34]John Downes and Jordan Elliot Goodman, Barron's Financial Guides Dictionary of
Finance and Investment Terms, (2003, 6th ed.), p. 389.
[35]Id.at 70.
[36]Mark Levinson, Guide to Financial Markets, (3rd ed.), p. 60.
[37]Purchase Fund ' provision in some PREFERRED STOCK contracts and BOND indentures
requiring the issuer to use its best efforts to purchase a specified number of shares or
bonds annually at a price not to exceed par value. Unlike SINKING FUND provisions,
which require that a certain number of bonds be retired annually, purchase funds require
only that a tender offer be made; if no securities are tendered, none are retired. Purchase
fund issued benefit the investor in a period of rising rates when the redemption price is
higher than the market price and the proceeds can be put to work at a higher return.
Barron's Financial Guides Dictionary of Finance and Investment Terms, supra note 34 at
548.
[38]Redemption repayment of a debt security or preferred stock issue, at or before

maturity, at PAR or at a premium price. Id. at 566.
[39]Refunding - replacing an old debt with a new one, usually in order to lower the
interest cost of the issuer. For instance, a corporation or municipality that has issued 10%
bonds may want to refund them by issuing 7% bonds if interest rates have dropped.
Id. at 567.
[40]Rollo, p. 10.
[41]Id. at 11.
[42]Id. at 12.
[43]Cesar G. Saldaa, Ph D., 'A Market Valuation Under Bargaining Game Perspective to
the Philippine Debt Package of 1991, a paper read before the Senate Committee on
Economic Affairs at the public hearing on 'Inquiry Into the Proposed Financial Debt
Restructuring Package on Thursday, 16 January 1992 at the Executive House Building,
Philippine Senate, Manila. Rollo, p. 112.
[44]Argentina began swapping defaulted bonds for new securities ' to restructure $104
billion of debt; Charts Investment Management Service Ltd., 25 May 2005, <
http://www.charts.com.mt/news.asp?id=1379>; Pakistan restructured its bonds with no
major systemic effects. 'IMF staff study, Bard discussion examine experience with
sovereign bond restructurings, IMF Survey Vol. 30 No. 4, 19 February 2001, p. 58, <
http://www.imf.org/external/pubs/ft/survey/2001/ 021901.pdf>; The government of
Uruguay officially accepted the outcome of the sovereign debt restructuring initiative, as
90% of the bondholders participated in the swap. Latin America Weekly Outlook, 23 May
2003, < http://www.scotiabank.com.mx/resources/052303latin.pdf>.
[45]Rollo, p. 163.
[46]P.D. No. 1177 (July 30, 1977), SECTION 31. Automatic Appropriations.All
expenditures for (a) personnel retirement premiums, government service insurance, and
other similar fixed expenditures, (b) principal and interest on public debt, (c) national
government guarantees of obligations which are drawn upon, are automatically
appropriated: provided, that no obligations shall be incurred or payments made from
funds thus automatically appropriated except as issued in the form of regular budgetary
allotments.
[47]Guingona v. Carague, G.R. No. 94571, 22 April 1991, 196 SCRA, 221, 236.
[48]Rollo, p. 10.
[49]Go Chico v. Martinez, 45 Phil. 256 (1923).
[50]Id. at 161.
[51]Ibid.
[52]Sec. 20, Art. VII, 1987 Const.
[53]R.A. No. 245, as amended.
[54]Guidelines for Public Debt Management, Prepared by the Staffs of the International
Monetary Fund and the World Bank, 21 March 2001,
<http://www.imf.org/external/np/mae/pdebt/2000/eng/>.
[55]67 Phil. 451 (1939).
[56]Id. at 464.
[57]The Administrative Code, E.O. 292, Book II Title II Chapter 1.
[58]Villena v. Secretary of the Interior, supra note 44 at 462-463.
[59]Now concurrence under the 1987 Constitution.
[60]G.R. No. 158540, 8 July 2004, 434 SCRA 65.
[61] Section 28, Article VI. . . .
2) The Congress may, by law, authorize the President to fix within specified
limits, and subject to such limitations and restrictions as it may impose,
tariff rates, import and export quotas, tonnage and wharfage dues, and
other duties or imposts within the framework of the national development
program of the Government.
[62]1987 Const.
[63]Id. at 77.
[64]Sec. 9, Art. II, 1987 Const.
[65]Sec. 10, id.
[66] Sec. 19, id
[67]Id. at pp. 95-97.
[68]Rollo, p. 96, referring to Annex 'E of Respondent's Comment, id. at pp. 131-141.
[69]Rollo, p. 96, referring to Annexes 'B and 'C of Respondent's Comment, id. at pp. 102-
120 and 121-129 respectively.
[70]Annex 'A of Respondent's Comment, id. at 101.
[71]Id. at 87-93.
[72]Id. at 95.
[73]Rollo, pp. 44-51, reprinted by the Freedom From Debt Coalition entitled Caught in a
One Way Street and Feeling Groovy, Rollo, pp. 187-194.
[74]According to Jude Esguerra, applying the Central Bank's assumptions and a criticism
against methodology devised by Professors Philip Medalla and Solita Monsod of the UP
School of Economics, the cost of the debt-relief package over the next six years comes up
to only $930.03 million. Over the next six years and under the most optimistic
assumptions the most that can be yielded is allegedly $218.99 million, not $2,041.00
million as claimed by the debt negotiators.
[75]According to Jude Esguerra, using a scenario where: (1) the interest rate
assumptions of Governor Cuisia (52%) in the first year, increasing gradually to 7% by the
6th year) turn out to be wrong and the average interest rate over the next six years is
around 5.5%, and (2) the Philippines uses up its own dollar reserves rather than loans
from WB, Japan and the IMF to pay for the costs of the packageover the next six years.
[76]A Market Valuation Under Bargaining Game Perspective to the Philippine Debt
Package of 1991 by Cesar G. Saldaa, Ph.D, a paper read before the Senate Committee on
Economic Affairs at the public hearing on 'Inquiry Into the Proposed Financial Debt
Restructuring Package on Thursday, 16 January 1992 at the Executive House Building,
Philippine Senate, Manila. Rollo, pp. 102-120; See also Statement On the Philippine
Foreign Debt Problem by O.V. Espiritu, President of the Bankers Association of the
Philippines and speaking in behalf thereof, Rollo, pp. 121-128.
[77]Rollo, p. 183.
[78]In the Matter of the Petition for Habeas Corpus of Lansang, et al., 149 Phil. 547
(1971).
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Constantino Vs Cuisia - 106064 - October 13, 2005 - J. Tinga - en Banc - Decision

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Spouses Renato G.R. No. 106064

Constantino, Jr. and

Lourdes Constantino Present:

and their minor children

Renato Redentor, DAVIDE, JR., CJ.,

Nina Elissa, and PANGANIBAN,

Anna Karmina, QUISUMBING,

Freedom From Debt ' YNARES-SANTIAGO,

Coalition, and Filomeno SANDOVAL-GUTIERREZ,

Sta. Ana III, CARPIO,

Hon. Jose B. Cuisia,

in his capacity as Governor

of the Central Bank,

Hon. Ramon delRosario,

in his capacity as Secretary

of Finance, Hon. Emmanuel V.

Pelaez, in his capacity as

Philippine Debt Negotiating

Chairman, and the NATIONAL Promulgated:

Respondents. October 13, 2005

Parties and Facts

Issues for Resolution

Petitioners raise several issues before this Court.

The Court's Rulings

Ripeness/Actual Case Dimension

One way to reduce debt service is to repudiate debts, totally or selectively.

The point that must be stressed is that repudiation is not an attractive

First Issue: The Scope of Section 20, Article VII

Sec. 1. In order to meet public expenditures authorized by law or to provide for

c. Treasury bonds, notes, securities or other evidences of indebtedness

On the Buyback Scheme

Congress deliberates or acts on the budget proposals of the President, and

Debt service is not included in the General Appropriation Act, since

Sec. 2. The Secretary of Finance shall cause to be paid out of any

Second Issue: Delegation of Power

With reference to the Executive Department of the government, there is one

very nature, cannot be validated by subsequent approval or ratification by the

With constitutional parameters already established, we may also note, as a source of

Third Issue: Grave Abuse of Discretion and

Violation of Constitutional Policies

On the other hand, in furtherance of their argument on respondents' violation of

[T]he price of success in putting together this debt-relief package (indicates)

WHEREFORE the petition is hereby DISMISSED. No costs.

DANTE O. TINGA Associate Justice

HILARIO G. DAVIDE, JR.

REYNATO S. PUNO ARTEMIO V. PANGANIBAN

Associate Justice Associate Justice

LEONARDO A. QUISUMBING CONSUELO YNARES-SANTIAGO

Associate Justice Associate Justice

ANGELINA SANDOVAL-GUTIERREZ ANTONIO T. CARPIO

Associate Justice Associate Justice

MA. ALICIA AUSTRIA - MARTINEZ RENATO C. CORONA

Associate Justice Associate Justice

CONCHITA CARPIO-MORALES ROMEO J. CALLEJO, SR.

Associate Justice Associate Justice

ADOLFO S. AZCUNA ' MINITA V. CHICO-NAZARIO Associate Justice Associate Justice

HILARIO G. DAVIDE, JR.

[2]Rollo, pp. 3-4.